Amid heightened concern over the war in neighboring Ukraine, Poland has joined a growing list of countries that have turned to South Korea to meet their critical defense needs, with Warsaw announcing a framework agreement to acquire light combat aircraft, tanks and artillery systems.
The arms deal with Poland, which includes 48 FA-50 light combat aircraft, 1,000 K2 Black Panther tanks, and 672 additional K9 Thunder self-propelled howitzers (SPHs), is by far the largest ever for South Korea’s growing defense industry, providing further evidence that Seoul’s efforts to promote and facilitate the sale of the country’s defense products are paying off.
Tried and tested platforms
The deal, which some South Korean media outlets say could be worth as much as 19 trillion won ($14.5 billion), marks the first overseas sale of K2s and the first sale of FA-50s to Europe, though many of South Korea’s state-of-the-art weapons systems have already been exported to other countries.
For instance, the FA-50, which is the light combat variant of the T-50 family of supersonic advanced trainer/light attack aircraft, is already in service with the Philippine Air Force.
Manufacturer Korea Aerospace Industries (KAI) has also exported dozens of T-50-series aircraft to Indonesia, Iraq and Thailand, and is currently anticipating orders from Colombia and Malaysia.
Hanwha Defense’s 52-caliber K9 SPHs are among South Korea’s best-selling military systems, with more than 600 units — including variants — exported to countries such as Poland, India, Turkey, Norway, Estonia and Finland.
Earlier this year, the company signed a $1.7 billion deal to provide “hundreds” of K9s and support vehicles to Egypt, while Australia is acquiring a variant of these artillery systems, which are also being offered to the United Kingdom to replace the British Army’s AS90 systems.
Meanwhile, Hyundai Rotem’s K2 tanks are competing against Germany’s Leopard 2A7s to become Norway’s next main battle tank.
From components to full platforms
While the K9 and FA-/T-50 are some of South Korea’s most popular export platforms, the country’s list of export items is much broader, from warships, submarines and training aircraft to an array of weapon, communication and electronic warfare systems, as South Korea has gradually moved from exporting components and munitions to delivering complete platforms and systems.
For instance, one of the country’s single largest defense export deals — worth $3.5 billion — was signed with the United Arab Emirates in January for the supply of an undisclosed number of Cheongung Block-2 medium-range air defense systems.
Defense exports have been particularly strong among Asia-Pacific countries, where unresolved disputes have prompted many countries in the region to look to Seoul to acquire stronger maritime deterrents.
For example, shipbuilder Hyundai Heavy Industries has provided two guided-missile frigates to the Philippine Navy and been contracted by Manila to also deliver two corvettes and six offshore patrol vessels. The company also built the New Zealand navy’s largest ship to date — the fleet tanker and replenishment vessel HMNZS Aotearoa.
Seoul also recently offered conventionally powered submarines to Australia as the country may face a capability gap if its Collins-class boats cannot operate until the late 2030s or early 2040s, when Canberra is expected to deploy its first nuclear-powered submarines as part of the AUKUS security pact with the U.S. and Britain.
Rapid growth
According to data provided by the Stockholm International Peace Research Institute (SIPRI), South Korea only accounted for about 1% of global defense exports between 2012 and 2016, but that figure shot up to 2.8% in the following five-year period through 2021 thanks to a 177% increase in sales. That made Seoul the world’s eight-largest defense exporter over that time frame. This was by far the largest increase in terms of market share for any of the world’s top 25 arms exporters, according to Siemon Wezeman, a senior researcher with SIPRI’s Arms Transfers Program.
According to a recently released report by the Export-Import Bank of Korea — one of several loan providers for South Korea’s Defense Acquisition Program Administration (DAPA) international customers — defense exports increased from around $3 billion in 2020 to $7 billion last year and are expected to reach $10 billion this year.
Last year also marked the first time South Korea’s defense exports exceeded imports, which totaled $5 billion, according to the bank.
What is driving the exports?
There are several factors behind the strong demand for South Korean military products, as Jon Grevatt, head of Asia-Pacific news at Janes, explains, including policies implemented by Seoul in recent years to shift the culture of South Korea’s defense industry from one that looked primarily at meeting domestic demand to one that is much more export oriented.
Two of the most important policies are the Defense Industry Development Act and the Defense Science and Technology Innovation Promotion Act, which came into force in February and April 2021, respectively.
“Both acts introduce numerous initiatives — such as enhanced import substitution, full component manufacturing on key platforms, incentivized defense R&D (research and development), rapid acquisition policies for 4IR (Fourth Industrial Revolution) technologies — to support exports and address weak points such as supply chain gaps in the domestic industrial base,” Grevatt said.
Furthermore, there has been a genuine whole-of-government drive in recent years to support such sales. This means that government ministries, defense attaches, government incentives, government banks and lenders, and R&D funding are all much more aligned in supporting defense exports, Grevatt said.
While South Korean products are not necessarily cheaper than those of their rivals, Seoul’s coordinated efforts have enabled support for customers in multiple areas, including loans, repayment flexibility, outgoing offset packages, technology transfers, investments and industrial collaboration in sectors that often go beyond defense, said the analyst.
“This whole-of-government support for exports often differentiates South Korean products, especially if compared with neighboring Japan.” Wezeman agrees, noting that Japanese companies have not focused strongly on arms production, and certainly not on arms exports, in recent years because for most of them the sale of military platforms only accounts for a small part of their portfolio (e.g., 13% for Mitsubishi Heavy Industries and 18% for Kawasaki Heavy Industries).
Tokyo had banned arms exports, in principle, until 2014, when the government eased measures if certain conditions were met. Still, even under the eased rules, Japanese firms have struggled to make headway in the industry due to high costs and stigma among the public.
That said, Japanese companies still have a larger home market. According to SIPRI, Japan's military spending in nominal terms is more than 15% higher than South Korea's.
‘Competitive and relevant’
Unlike Japan, South Korea is targeting defense exports in every geographical market, with the biggest successes to date coming in developing markets.
As Wezeman noted, all large South Korean arms producers are active internationally and regularly exhibit their products at defense exhibitions around the world.
“South Korean companies, including Hanwha, KAI and LIG Nex1, make no secret of their aim to become major players on the global arms market. For many, it is an important segment of their total market (e.g. 100% for LIG Nex1, 72% for KAI), so in that respect they are very similar to the large U.S. and European arms producers,” said Wezeman.
The attractiveness of buying South Korean defense products is also supported by the capability gains made by South Korean products over the past decade, as evidenced by new platforms such as the KF-21 multirole fighter — which conducted its first flight earlier this month — and continued enhancements of products such as the K9 and the K21 infantry fighting vehicle, says Grevatt, noting that this has ensured that South Korea defense exports are competitive and relevant.
In fact, Wezeman argues that the military systems and platforms made in South Korea have reached such a level of sophistication and maturity that “they compare well with arms from many of the more 'traditional' producers such as the U.K., France, Italy, Sweden and Israel, and can thus — at least on the technical level — compete with those producers.” The growing level of innovation and sophistication is not only driven by the need to boost defense exports. Faced with the persistent threat of conflict with its northern neighbor, Seoul has for years maintained a steady trajectory of military modernization, and is now increasingly relying on advanced platforms, systems and technologies that are “Made in Korea” to counter that threat.
‘Real progress’
These advancements are not only geared toward bolstering deterrence but also gaining crucial technological advantages over Pyongyang. At the same time, Seoul aims to strengthen the local defense industry and make the nation more self-reliant, all the while exploring how new technologies can help mitigate the impact of South Korea’s declining population on the military.
“South Korea has been quietly ambitious about developing its defense industrial capabilities for a number of years and real progress is now becoming apparent,” said Trevor Taylor, director of the Defence, Industries and Society Programme at the U.K.-based Royal United Services Institute (RUSI).
“The road has not been smooth, and the tanker ships DSME built for the U.K. Royal Navy were late in delivery and brought the company major financial problems. The KF-21 aircraft collaboration with Indonesia has also struggled. However, there have been reforms in the defense ministry involving more civilians in defense acquisition, and improving governance,” Taylor said.
The RUSI expert explained that the government, large industrial conglomerates and smaller firms appear to be able to work well together in South Korea.
“Their products appear to reflect the belief that saleable defense equipment does not need to be the most technologically complex but good enough to deal effectively with a country’s adversaries at an acceptable human and financial cost,” noted Taylor.
Further diversification needed
The arms deal with Poland could help generate greater momentum for South Korean defense exports. Russia’s invasion of Ukraine is likely to create new opportunities as countries across Europe seek to bolster their defenses.
That said, there will also be challenges ahead.
“For South Korea, 2021 was a good year for defense exports but sustained increases of exports have been difficult to achieve,” Grevatt said.
Growing international competition (especially in developing markets), economic constraints in target markets, target markets’ growing emphasis on self-reliance and mixed success in major platform sales have factored into that struggle.
Grevatt warns that a big challenge for South Korea in achieving sustained strong growth is the country’s rather limited list of primary export platforms.
“There has been so much reliance in the past decade on platforms such as the K-9 and T-50, which also suggests that sustaining increases in sales will be very difficult.” South Korea, therefore, needs to significantly expand the list of major platforms it can sell in international markets.
“Diversification efforts are well underway in terms of components and subsystems, but sales of these much cheaper products won’t provide the big increases in exports that Seoul is targeting,” Grevatt said.
This is why Sangsoo Lee, head of the Stockholm Korea Center at the Institute for Security and Development Policy, believes Seoul will also focus on developing new missile and space technologies, particularly after the U.S. lifted its missile restrictions on South Korea last year, as well as on emerging dual-use technologies such as artificial intelligence, quantum computing, and more advanced semiconductors.
Moreover, Seoul — which is developing closer ties with NATO — will probably also seek to export weapons to European and Asian countries that have distanced themselves from Russia after the Ukraine invasion.
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